“Honey, why isn’t the car in the driveway? I’m going to be late for work.”

“That nice man took it.”

“What nice man?”

“The man who knocked on the door this morning and asked for the keys to our car. He said he had to go someplace today and wasn’t sure when he would be back.”

“What did he mean, our car? That’s my private property.”

“Oh, it’s all right. He had a paper from the government that gave him access to our car any time he wants. He says this is a new kind of private property; it’s our car because you bought it with money that our government let you keep out of your paycheck. They could have taken all of it, you know. But don’t worry, he’s going to pay us for using it.”

“How much?”

“Well, $6 a day, but it says on the paper that we have to buy the gas and insurance. The price was set by a different department. He says you’ll have to talk with them if you want more.”

“$6 a day for a powder blue ’65 Mustang convertible?”

“Oh, and I forgot to tell you. He said to tell you our car needs a set of new tires and a CD player and you can take care of it whenever he brings the car back.”

“And when might that be?”

“I’m sure he will be back by the end of the week. He said he is throwing a big party and he is going to need our house for the weekend.”

I know what you’re thinking. That couldn’t happen in America. This is a land of freedom and private property. But it is happening today, and right in your house. The Federal Communications Commission has adopted a ruling they forensically describe as “forced-access”, which forces your local phone company to give complete access to their network and facilities to any competitor who shows up in their driveway. Like the ’65 Mustang, the price they are paid for the use of their private property is controlled by politically appointed regulators or by politicians themselves, state by state, across the country. And just like the car, the local phone company is forced to pay for the maintenance and repairs it takes to keep the network running, as well as the cost of any new equipment they buy to improve their service to you.

The FCC justifies forced access on the grounds that it increases competition in the telecom industry. But genuine competition—the sort that improves quality and lowers costs to consumers in the long-term—requires new firms to bring new capital to the table to increase capacity. Forced access does neither. By forcing existing firms to allow others to use their capital service quality is degraded for everyone. And by setting controlled prices too low, forced access creates a situation where, ironically, new investment is reduced for both the new and existing carrier. The new carrier has no incentive to build new network facilities; he can use the existing network for little cost. The existing carrier is discouraged from making new capital investments because controlled access charges and increased maintenance costs drive cost of capital down, making further investment uneconomic. The long-term result is a degraded phone system, lower capacity, and higher prices.

There is nothing new here. Politicians have used price controls to achieve short-term political objectives since Emperor Diocletian imposed price controls in Rome 2000 years ago. They always produce the same results—less goods, lower quality, and higher prices.

The rapid growth of both wireless and cable services available to consumers has brought about a dramatic decrease in local phone companies’ market share of total communications and data revenues, and plummeting prices. True competition, created by new capital coming into the market to build systems to build new technologies and enhance old ones, is very good for consumers. Price controls and mandatory access to existing network resources is not.

Last revised November 2, 2003